The Recession May Have Already Ended

As the economy slogs through the recession — now in its 20th month, many analysts and economists are trying to project when the economy will turn around, thus marking the end of the recession. Some however, say it’s highly possible that the turnaround has already taken place and the recession has ended months ago. To support that claim they look at initial unemployment insurance weekly claims and the pattern that that time series has followed in previous economic contractions.

The latest to weigh in on the debate is Christopher Rupkey, the New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ. In a note this morning, he says a V-shaped recovery…. is “maybe not as far-fetched as you think”.

“Consumers and businesses have postponed purchases for six months, the population is still growing about 1.2% per year, and if the unemployment rate is close to peaking, then growth may be firmer than expected in the second half of 2009,” he writes.

As for claiming the recession may have already ended, he points to a series that in the past has proven a remarkably good indicator of business cycle troughs: weekly claims for unemployment benefits. That series peaked in the week of March 28 when a seasonally adjusted 674,000 new claims were filed; it has since retreated though it remains historically high. If that peak holds, it means the recession likely ended in April or May, he said.

Now, we could be totally wrong since no one can guess or time the markets perfectly. However, if the past is any indication, Rupkey has a point. Most likely the recession ended in May.